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Conservation Finance and Impact Investing for U.S. Water

The 2016 Aspen-Nicholas Water Forum focused on the shifting role of public and private financing for water infrastructure and the new universe of innovative financing solutions to create impacts in the water sector, including how impact investing can hold the multiple roles of bridging the ever growing funding gap for infrastructure, improve water use efficiencies, and protect water resources while at the same time making a financial profit. Among the forum report's key findings: 1) Business as usual is not sustainable—we as a society are now paying for the “can-kicking” that has occurred while we debated responsibility for U.S. water resources; 2) The water issues we face as a nation continue to grow as the water community dithers and invests in one-off projects, rather than focusing on scaled solutions like regionalization and integration; 3) Money is not the issue; there is plenty of private capital available to meet the current water funding gap, but there are significant barriers to impactful and innovative financing; 4) Government regulation and public education can go hand in hand to gain public support for improved water management while supporting social equity; and 5) Leadership is one of the prime movers for innovative finance projects in the water space.

Authors: Lauren Patterson, Martin Doyle, and Nicole Buckley

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Aspen-Nicholas Institute Water Forum

Water Policy

Environmental Economics

Reports

Ecosystem Service Concepts in Practice

Economists have long embraced the idea that services provided by nature have inherent economic value. Ecologists, other scientists, and many in the environmental advocacy community have more recently come to focus on the connection between natural systems and economic value. The broadening interest in the economic value of nature over the last two decades led to the emergence of the interrelated and now commonly used terms ecosystem services and natural capital. To inform Canadian policy, this article in a special issue of the journal Canadian Public Policy discusses some of the efforts that have been enacted elsewhere, with particular emphasis on those in the United States, and why some have been more successful than others.

Author: Brian C. Murray

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Climate and Energy

Ecosystem Services

Environmental Economics

Journal Articles

The Paris Agreement and Beyond: International Climate Change Policy Post 2020

While the Paris Agreement sets forth an innovative and potentially effective policy architecture, a great deal remains to be done to elaborate the accord—to formulate the many rules and guidelines required and to specify more precise means of implementation. Governments, other stakeholders, and researchers also need to think about constraints on the effectiveness of the Paris Agreement—and identify organizations and processes that could complement the Paris Agreement and the United Nations Framework Convention on Climate Change process more broadly. In July 2016, the Harvard Project on Climate Agreements hosted a research workshop at the Harvard Kennedy School, the purpose of which was to identify options for elaborating and implementing the Paris Agreement—and to identify policies and institutions that might complement or supplement the Paris-Agreement regime. Participants, which included Nicholas Institute researchers Brian Murray and Billy Pizer, subsequently prepared the briefs that are included in this volume, based largely on their presentations at the workshop, addressing opportunities for—and challenges to—elaborating, implementing, and complementing the Paris Agreement. 

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Climate and Energy

Environmental Economics

Reports

North American Climate Policy Forum: Exploring Cooperation between Canada, the U.S., and Mexico, June 22–23, 2016—Post-Conference Discussion and Summary Report

Canada, the United States, and Mexico have begun to recognize opportunities for harmonization on climate change policy as a way to decrease costs and increase the efficiency of actions to address climate change and to help all three countries achieve their greenhouse gas (GHG) emissions reduction goals pledged under the 2015 Paris Agreement. Although significant progress has been made at the sub-national level on climate policy innovation in North America, more work is needed to understand how increased coordination on climate change policies in North America could address concerns such as competitiveness, emissions leakage, and policy consistency in the region. To begin the conversation on the potential for and impacts of climate policy harmonization in North America, The University of Ottawa’s Sustainable Prosperity (now Smart Prosperity Institute) and Duke University organized the first annual North American Climate Policy (NACP) Forum, June 23-24, 2016, in Ottawa, Canada. The forum brought together prominent climate policy makers, business leaders, and researchers to discuss policy options to mitigate climate change and stimulate innovation for low-carbon technology solutions, to initiate conversation about whether climate goals and policies could and should be harmonized across the region, and to highlight the potential challenges and advantages of such harmonization ahead of the 2016 North American Leader’s Summit, also in Ottawa, where joint energy and climate change policy goals were announced by Prime Minister of Canada Justin Trudeau, President of the United States Barack Obama, and President of Mexico Enrique Peña Nieto. This report presents an overview of how existing regulatory approaches to climate change as well as recently announced joint emissions reduction targets lay the groundwork for climate policy harmonization. It then describes four issue areas that present potential opportunities and challenges for climate policy harmonization: alignment with trade policy, carbon pricing, clean innovation policy, and climate change adaptation policies. For each area, it reviews relevant insights from discussion at the forum, occasionally expanding on them by drawing on relevant literature. The report concludes with opportunities for future research that can further illuminate the issues raised at the conference and in the literature.

Authors: Emily Pechar, Mercedes Marcano, Acacia Paton-Young, Brian Murray, and Geoff McCarney

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Climate and Energy

Environmental Economics

Reports

Increasing Emissions Certainty under a Carbon Tax

To reduce greenhouse gas emissions, some groups have proposed that the United States consider use of a carbon tax. But whether the nation will achieve a specific emissions goal is uncertain because the economy’s response to such a tax is uncertain. Ultimately, there is an underlying tradeoff between certainty about emissions and certainty about prices and costs. To reduce uncertainty about whether a tax will achieve specific emissions goals, additional mitigation measures could be called on if emissions exceed those goals by a given amount. However, such additional measures introduce uncertainty about costs. At the extreme, a commitment to achieve emissions targets at all costs would imply that costs could be quite high. Discussions of policy mechanisms to increase price and cost certainty under several current cap-and-trade programs confronted this same dilemma: how much uncertainty about emissions outcomes is acceptable given reciprocal uncertainty about costs? Viewed through a slightly different lens, mechanisms that balance emissions and cost uncertainty can be viewed as a way to structure a more careful compromise between economic and environmental interests. This policy brief discusses mechanisms that could increase emissions certainty under a carbon tax. It draws from recent discussions between the authors and other policy experts, and its goal is to introduce ideas for further exploration. It begins with a discussion of how to measure emissions performance, or what it means to be achieving or not achieving an emissions goal. This performance would presumably provide the basis for pursuing remedial mechanisms. Next, the brief turns to a taxonomy of such mechanisms and the challenges and opportunities of each. It discusses ideas for initiating these mechanisms, either through some automated or discretionary procedure. The brief concludes with areas for additional research. The brief intentionally raises more questions than it answers—questions will be important to explore in ways that can provide guidance to policy decisions and design.

Authors: Brian Murray, William A. Pizer, and Christina Reichert

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Carbon Tax

Climate and Energy

Environmental Economics

Policy Briefs

Illuminating the Energy Policy Agenda: Electricity Sector Issues Facing the Next Administration

The next president will take office during a period of rapid market and regulatory change for the U.S. electricity sector. Due to statutory deadlines, pending lawsuits, and agency rulemakings—if not by choice—the next president will tackle energy policy. To prepare policy makers for what promises to be a dynamic period in electricity law and policy, this report provides an overview of each of six key areas of federal policy and, for each area, identifies the decision points—in time or circumstances—that will force the next administration to make choices that shape the future of the grid. For each decision point, the report explores the next president’s options and the federal agencies and authorities that he or she could deploy.

Authors: Jonas Monast, Kate Konschnik, Ari Peskoe, Sarah Adair, and Christina Reichert

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Climate and Energy

Clean Air Act

Environmental Economics

Energy Sector

Reports

Toward a Blue Economy: A Promise for Sustainable Growth in the Caribbean

Toward a Blue Economy: A promise for Sustainable Growth in the Caribbean, a World Bank report co-authored by a Nicholas Institute for Environmental Policy Solutions researcher, is a guide to help Caribbean policymakers plan a successful transition to a blue economy and socially equitable blue growth. This report attempts to quantify the current ocean economy in the region and summarize projections about where we may find new pockets of sustainable growth, and define the blue economy concepts and possible policy responses that might better align economic growth and environmental health in the Caribbean. At a global level, the transition to a blue economy will significantly contribute to achieve Sustainable Development Goal (SDG) 14 for the ocean and other goals such as poverty reduction, food security, energy security, climate change mitigation, among others.

Authors: Pawan G. Patil, John Virdin, Sylvia Michele Diez, Julian Roberts, and Asha Singh

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Blue Economy

Ocean and Coastal Policy

Ecosystem Services

Environmental Economics

Reports

Economic Tools to Promote Transparency and Comparability in the Paris Agreement

The Paris Agreement culminates a six-year transition toward an international climate policy architecture based on submission of national pledges every five years. An important policy task will be to assess and compare these pledges. This study in the journal Nature Climate Change uses four integrated assessment models to produce metrics of Paris Agreement pledges, and it shows differentiated effort across countries: compared with poorer countries, wealthier countries undertake greater emissions reductions with higher costs. The pledges fall in the lower end of the distributions of the social cost of carbon and the cost-minimizing path to limiting warming to 2 degrees Centigrade, suggesting insufficient global ambition in light of leaders’ climate goals. Countries’ marginal abatement costs vary by two orders of magnitude, illustrating that large efficiency gains are available through joint mitigation efforts, carbon price coordination, or both. Marginal costs rise almost proportionally with income, but full policy costs reveal more complex regional patterns due to terms of trade effects.

Authors: Joseph Aldy, William Pizer, Massimo Tavoni, Lara Aleluia Reis, Keigo Akimoto, Geffrey Blanford, Carlo Carraro, Leon E. Clarke, James Edmonds, Gokul C. Iyer, Haewon C. McJeon, Richard Richels, Steven Rose, and Fuminori Sano

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Environmental Economics

Modeling

Journal Articles

Transport of Hydraulic Fracturing Waste from Pennsylvania Wells: A County-Level Analysis of Road Use and Associated Road Repair Costs

Pennsylvania’s rapid unconventional oil and gas development—from a single well in 2004 to more than 6700 wells in 2013—has dramatically increased unconventional oil and gas waste transport by heavy trucks. In an article published in the Journal of Environmental Management, researchers at the Nicholas Institute for Environmental Policy Solutions and the U.S. Geological Survey report that transportation of waste associated with the development of unconventional oil and gas in Pennsylvania increases the cost of road repairs not only in Pennsylvania but in counties in the surrounding states of West Virginia, Maryland, New Jersey, Ohio, and New York. Between July 2010 and December 2013, the estimated cost to repair roads damaged by trucks transporting unconventional oil and gas waste ranged from $3 million to $18 million. Although the majority of these costs were concentrated in Pennsylvania (79 percent), Ohio counties absorbed some of them (16 percent). The study includes an interactive graphic for visualization of the data.   

Authors: Lauren A. Patterson and Kelly O. Maloney

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Hydraulic Fracturing and Water Use

Climate and Energy

Water Policy

Environmental Economics

State Policy

Journal Articles

Effect of Existing and Novel Policy Options on the Sustainable Development of Regional Bioenergy Systems: Lessons and Future Directions

What are the most appropriate policies to facilitate regional bioenergy systems in furtherance of environmental, social, and economic objectives? A multi-year research project funded by the U.S. Department of Agriculture’s National Institute of Food and Agriculture has attempted to answer that question for the southeastern United States. Project analyses found few policies targeted to the upstream portions of the supply chain in the region, suggesting that efforts to encourage sustainable bioenergy markets should be cognizant of the dynamics of feedstock production and use. Investigation of bioenergy market participation identified non-production objectives, structural and social constraints, and market-related attributes that could influence market participation decision making. It also suggested that policies specific to individual markets might be more effective than uniform national initiatives in encouraging participation. Modeling of potential policies to facilitate development of regional bioenergy systems suggested that feedstock dynamics play a critical role in outcomes. A region-wide renewable portfolio standard—a policy characterized by few restrictions on the location of feedstock production and use—led to increases in forest carbon and decreases in greenhouse gas emissions at multiple scales. Forcing feedstock production and use to occur in particular locations might have the opposite outcome. The effectiveness of regional bioenergy systems will depend on the responsiveness of policy to social, economic, and resource conditions.

Authors: Christopher S. Galik, Tibor Vegh, Robert C. Abt, and Gregory Latta

 

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Climate and Energy

Regional Bioenergy

Environmental Economics

Modeling

Working Papers

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